How will mobile really deal with payments? Who will wrestle control? The number of initiatives around mobile payments are growing. I’ll ignore the mPesa type of example here for now. The primary smartphone contrast today is between NFC (PayWave/Visa), Beacon (PayPal) and iBeacon (Apple) which isn’t even a payments system yet. Although Apple is hinting at their direction with the iPhone 5S a fingerprint reader and iTunes payments. Will iPhone 5S purchasers get a new Apple Store (physical and App) experience? Only time will tell. This post is not a prediction that BluetoothLE will win, it merely means to help explore what it might mean. As a contrast see this:
“I absolutely do not see BLE as a replacement for NFC,” he said. “I see them as complementary and not competitive. BLE is primarily a location positioning technology that can also deliver content within a confined geographic area. NFC is a physical object engagement technology. Both have distinct use-cases that do not conflict. I do think BLE has a future. Like NFC, tag management and cost will be a big issue connected with its deployment.” via Taking stock of Apple’s iBeacon | MobilePaymentsToday.com.
Behind the advances is Bluetooth LE for low energy. Compared to NFC it is significantly better at managing proximity and doesn’t require a “physical-touch” on the in-store payment device to complete a transaction. This may or may not be good. I tend to find it more appealing. Systems using this latest form of bluetooth can thus “wake” or “notify” a mobile device and shift messages and activity based on location over a larger area. This means a single node or beacon can provide different messaging. For example one on a register could also be providing promotional offers to passing shoppers 150ft away. Similarly, multiple beacons can be installed inside a large store creating a network of different experiences. (see Estimote).
There are two big challenges.
1. How do retailers bring this in to their stores and integrate it with their current POS and customer management systems?
2. How will it work on the mobile device from both user experience and a more technical perspective?
I’d like to focus on point two for the rest of this this post.
For the User:
How will these interruptions, vibrations in your pocket, and localized content offers actually play out? Example given the proximity sensitivity you could be in an apartment store some 100ft from a display, and you could get a shopping recommendation – eg go and look. It can even give you a pointer as where to walk or head (how do we handle the floor above? 
). When you are at the display it may provide special pricing or it could offer other product matches in other parts of the store that you might like. This experience could be completely customized to you. There are many nuances in this transaction. Imagine it suggests that you buy it for a Facebook friend for their birthday, or some other form of gift reminder. Think about all the other reasons you may be in a store. Helping your partner shop. How could this technology help you surprise them with a special choice for finding something? The list will just grow. However the extensions are even greater. Having picked up the new sweater you could just pick up a bag and confirm you purchase and walk out of the store. The electronic check at the door matching you and your paid for items invisibly.
In a large department store users won’t want a proliferation of apps competing for their attention. Retailers also want to manage the experience from start to finish. A big context differentiator for any system is “time”. How long will a customer be in the store? Is it a quick in/out collection or payment? Do they know what they want and is it a fast transaction? If a question of speed is there an opportunity to “add” extras to this transaction? What if the customer just came in to browse? Or they had never shopped there before? Could a customer actually be acting as a proxy for someone else? Context and time will play a big role in any solution.
The other interesting thing about iBeacon is it works both ways. Your smartphone can also be a beacon. So the small retailer, or the market stall, or street vendor could use their mobile device as a beacon to “bring extra business to them” and then ring up the sale on the same device or even on your device. Similarly, it can create new relationships and potentially bring that small entrepreneur a world full of data and new opportunities. Many smart phone carrying owners may hate this thought. So let’s refine it with a filter. Imagine now walking down the street in a market full of vendors and only getting relevant things from those that have a Yelp rating over 4.6 or some personalized filters. That may be more like shopping for treasure.
The Technology Challenge:
The issue is will Apple iBeacon (like technologies) be embedded into the operating system (Apple’s iBeacon, Google/Android Copy? Google is also following with a Bluetooth LE strategy.) to capture payments or will these features facilitate payments for more traditional payment solutions? Will Apple promote more innovation in payment Apps so solutions are more OTT (over the top) like PayPal’s Beacon App or current banking apps? My guess is Apple will facilitate OTT apps while perfecting their own and may roll this technology out in different ways. There are t0o many variables and different experiences for innovation not to go broader. When studying this evolution both the large retail opportunity and the individual are important. I suspect the individual is underserved in this area (globally) and I could write a whole post on that.
The challenge and risk for everyone developing a payment system is how does it relate to the operating system? For example, consider the parallels with VoIP services. Mobile operators had SMS, then consumers came along and bought smartphones; added data and embraced everything from What’sApp to SnapChat. All these services are OTT meaning the carrier doesn’t benefit or participate in them. Then there is FaceTime or iMessage which is both effectively OTT but also embedded into the iOS operating system which adds convenience – easy to use and the sheer utility may be hard to copy (thus challenges the Apps). Carriers/Mobile operators hate OTT plays and have also plotted for years to get in on the payments bandwagon. Banks too see the threat of mobile and like mobile operators they are already using regulations and other strong arm tactics to protect their position in many countries.
The larger question is can iOS or Android become our banking / payment transaction friend? That may rest on both economics and trust. Concurrently, do emerging solutions reduce or eliminate fraud while making payments easy? With large app stores, both Google and Apple are already in our pockets although the outcome won’t be decided very quickly. Like iMessage it may come in a few years. In the meantime there will be a proliferation of apps and hardware. Those making “iBeacon” like hardware will also want to be reasonably universal unless they want a proprietary solution like Paypal is proposing. Today, we can’t even dream up all the use cases. We should keep looking at the world in many different ways considering how a multiplicity of Bluetooth LE nodes might change how we interact with an environment.
I originally started looking at this post reading how PayPal Beacon works as an add-on to traditional POS systems. It does indeed present a quicker more friction free payment case. This may make a real service difference in high volume outlets. Example a Starbucks or McDonalds. Yet chains that size can also create their own iBeacon apps and take additional control over the experience and I suspect that’s more likely.
The trillion dollar question over the next 2 to 3 years is which payment system is going to win? What new approaches will emerge? Will cash continue? Do Visa or American Express continue as plastic become Apps? Will PayPal be the new solution on mobile or will Apple or Google block their way? As a point of reference the following snip points to why PayPal Beacon thinks they are better than other solutions (Estimote, Roximity Beacons, Adomaly, NFC, geolocation, etc.)
PayPal Beacon is better than… Because…
- Geofencing Drains battery life, less accurate, requires pre-selecting a limited number of locations, relies on Wi-Fi or cellular network
- iBeacon iOS only, privacy concerns (one way communication means the server tracks you)
- General Phone can communicate to the cloud/PayPal without a signal (great for thick concrete walls, Victorian buildings)
- NFC Requires you to pull out phone to pay (slower to tap a phone), requires NFC-enabled phone
- Regular Bluetooth Drains battery
- Credit Card Requires you to take out credit card to pay (slower to swipe card)
via Beacon – PayPal.